2016 (11) TMI 756 - AT - Customs

Valuation - enhancement of value - drill bits of HSS nature - whether the drill bits imported by the appellant have to be considered as drill bits of HSS or otherwise? - Held that - the drill bits which are analyzed do not conform to any specification of high speed steel and do not have the strength and hardness of high speed steel and the drill bits are of mild nature and made of alloy steel. Despite such a clear test report of the IIT the adjudicating authority has held that the goods are liable for confiscation as they are of high speed steel. In our view the adjudicating authority being not an expert in the matter of composition of the goods which has to be kept in mind while seeking the classification and the rate of duty could not have gone beyond the report given by an expert engaged by department and that also by IIT Mumbai. On this point itself we find that the entire order of the adjudicating authority holding that the drill bits are of HSS nature and needs to be confiscated for misdeclaration of the description as well as the value seems to be unsustainable and we hold it so. Violation of N/N. 1/64-Cus. - Held that - the Notification 1/64 was not in conformity with the provisions of the Trade Marks Act 1999; and another notification was subsequently issued in 2007 by the Government under Customs Act. Once the Act is repealed the provisions of the said Act which has been borrowed by the Customs notification cannot be applied in the case in hand Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Undervaluation of imported drill bits
2. Confiscation of goods and imposition of penalties
3. Classification of drill bits as high speed steel (HSS)
4. Violation of Notification 1/64-Cus.

Undervaluation of imported drill bits:
The appellant imported drill bits and declared an assessable value. The goods were examined, and samples were sent for analysis. A show cause notice was issued for confiscation and duty demand. The appellant contested the case, arguing against the charge of undervaluation. The appellant based their declaration on the manufacturer's invoice, supported by test reports. The Tribunal noted precedents where declarations based on manufacturer's invoices were accepted unless proven otherwise. The Tribunal found the charge of undervaluation to be incorrect.

Confiscation of goods and imposition of penalties:
The adjudicating authority confiscated the goods, enhanced their value, and imposed penalties based on the findings. The appellant contested these decisions. The Tribunal reviewed the submissions and found the adjudicating authority's actions unsustainable. The order confiscating the goods and imposing penalties was set aside.

Classification of drill bits as high speed steel (HSS):
The main issue was whether the imported drill bits were of HSS nature. The investigation began with a complaint, and samples were tested by the Deputy Chief Chemist and IIT, Mumbai. The IIT report stated that the drill bits did not conform to HSS specifications and were of mild nature, not HSS. The Tribunal emphasized the expertise of the IIT report and held that the adjudicating authority's classification of the drill bits as HSS was unsustainable. The order confiscating the goods for misdeclaration of description and value was set aside.

Violation of Notification 1/64-Cus.:
The goods were confiscated citing violation of Notification 1/64-Cus. The Tribunal found this reasoning erroneous as the notification was not in conformity with the Trade Marks Act, 1999, and a subsequent notification was issued in 2007. The Tribunal held that once an Act is repealed, provisions borrowed by Customs notifications from the repealed Act cannot be applied. Therefore, the confiscation based on Notification 1/64-Cus. was deemed unsustainable. The impugned order was set aside, and the appeal was allowed with consequential relief.

This detailed analysis of the legal judgment highlights the key issues involved and the Tribunal's comprehensive review and decision on each issue, ensuring a thorough understanding of the case.